Battle lines drawn over airport fees

Date: 16/05/1996

By Chris Johnstone

AIRLINES and airports are squaring up for a fierce fight over European Commission plans to regulate airport charges.

Battle lines are already drawn, with both sides far apart and the Commission caught in the crossfire as it prepares a draft directive due to be published before the summer.

Airlines make no bones about wanting a hard-hitting directive that would force airports to operate efficiently, cut costs and pass on savings to their users.

Airports are looking for the weakest and woolliest guidelines possible to keep the Commission out of their business.

So far, the efficient airports' lobby - with past victories in the battles over duty free and airport handling fresh in the mind - seems to be winning the day.

Current drafts of the proposal demand that airports come clean over how landing, take-off and passenger charges are estimated and set, insist airports should not give unfair discounts to some airlines, and say their charges should be based realistically on costs.

But the Association of European Airlines (AEA) is unhappy with the current draft proposals and has called for a tougher stand on costs.

“We have requested an extra clause demanding efficiency from monopolies,” said AEA Secretary-General Karl-Heinz Neumeister. “It is no good explaining costs, they can always be explained. They must be tackled.”

Airlines are desperate for action on this point. Although the AEA reported a 9,000 increase in its members' payrolls in 1995, airlines have been through the pain barrier in the last few years - cutting 9,000 jobs in 1993 and a further 5,000 in 1994.

Now established airlines face fresh pressure on their profits as brash newcomers such as Richard Branson's Virgin Express threaten to slash ticket prices, and full competition in Europe's skies is just around the corner in mid-1997. Airports, protected by their monopolies or oligopolies, have failed to relieve their pain by cutting charges, the airlines say.

They also have a score to settle with airports after being outmanoeuvred over the opening up of airport handling monopolies last year.

The Commission is sympathetic to the airlines' grievances. Its Europe-wide survey of airports revealed wide variations in charges, but failed to come out clearly and say airlines were paying the airports too much.

In a survey of 22 European airports, the Commission found landing charges on a Fokker 100 jet varied from 0.25 to 2.21 on an international flight (assuming 1.0 as the Community average). Passenger charges on national flights varied by 0.25 to 2.31.

In a blunt summing up, the Commission said exchange rate variations, differences in wages, and environmental constraints could not explain cost variations of between one and 18 for international traffic and one and nine for domestic passengers.

The Commission also found that international flights, including those within the EU, face significantly higher landing fees and passenger charges than national flights at many airports, even though the aircraft and use of airport facilities are the same. Landing charges are more than twice as high for a small business aircraft and just under twice as high for the Boeing 747, the long-haul workhorse of many airlines. Passenger fees can be three times as high on international flights as on local ones.

The self-styled voice of European airports, Airports Council International Europe (ACI), says it has not been given the facts behind the Commission survey. However, it warns that many airports would have to raise their charges if the Commission insisted on a strict link between costs and prices. “Many airports subsidise their charges through duty free sales and other businesses,” said a spokesman.

ACI adds that any Commission move on costs and prices would also have to take into account the patchwork of accounting principles currently used by European airports. For example, Copenhagen airport accounts for runway depreciation over 20 years, while British airports allow ten years.

The Airports Council also highlights the Commission's Achilles' heel on airport charges - the fact that national governments have a large say in the current pricing regimes and are unlikely to want to give it up.

The Commission is also facing a divided airlines industry. The big airlines may be unhappy about its current proposals but smaller, regional airlines are livid.

Draft Commission proposals sanction congested airports using their charging formulas to price smaller aircraft off their runways altogether. “It is unacceptable,” says Simon Tudge of the European Regional Airlines Association. “It seems strange that you have the right to pick and choose between airlines. A regional airline might have done as much as a national carrier to build up a route and make it known, only to be told 'tough, you are no longer wanted'.”

Regional airlines say they have already been priced out of Europe's two biggest airports, Heathrow and Frankfurt, and believe they now face the Commission aiding and abetting a runway rout.